A reserve at an auction, means a "reserved" auction item will not sell unless it meets a price threshold. Since the literal definition an auction is: "a publicly held sale at which property or goods are sold to the highest bidder", A reserve is a corruption of the auction process.
Here's the link to the Dictionary.com stating so. https://www.dictionary.com/browse/auction?s=t
Many potential clients will ask me to consign an item and then state that they'd like to put a reserve on the item. With rare exception, I almost always refuse. If an auction lot is strong enough to get competitive bidding, there is no need for a reserve. If the item is NOT strong enough for competition, again, there is no need for a reserve.
Most of the audience is in attendance because they are looking for items at which they have a fighting chance to get below market value. The quickest way to thin out the buyers at an auction is to place reserves on the better items.
A reserve is different from a minimum bid, more on that to follow. But let's say an item has a fair market value of $500.00. Usually a client that wants a reserve will seek one in the $350 to $450 range. How do you think this works with the general public who is used to seeing 50%-70% off sales at certain retail stores? Right.
However, most auctioneers will not let the $500 item start for a ridiculously low bid, say $50. Whatever he/she DOES start the bidding at is generally called the minimum bid.
When the bidding starts low, generally it will take off pretty good and bring FAV (Fair Auction Value). What is fair auction value? As far as I know, I coined the term, but who cares. I consider FAV to be the value an item is bid up to in a well advertised sale, which is well attended.
If a buyer has cash, it's not that hard to get into a market place and buy at wholesale or even below wholesale. So why would they sit at an auction for 2 hours and start the bidding for a reserved items at 75%-90%? of market value . They won't. Which is why most auctioneers don't do reserves.
Of auctioneers that do, they now have in their contracts that they'll receive 10%-30% of the reserve price if it doesn't sell. Want to reserve an item for $1000? If it doesn't make the reserve, it could cost the consignor $300! Read the fine print. Oh, of course, your item is held as collateral against the Reserve Commission Fee.
On the other hand, auctions such as Cape Ann Auction, which sell without reserve, have a strong bidding pool which creates heated competition and drives prices up for the "good stuff" - much of the time. You see, an auction is a bit of a gamble, the biggest benefit to the seller being that 95-100% of the items will be sold at the end of the night.
I don't know of ANY OTHER sales venue that can consistently perform like that. And when you create a competitive, fair atmosphere for interesting items, some of them are going to sell below market value. It's the nature of the game. If you think you couldn't bear to risk having your item sell for below market value, (don't forget it could also sell for well above too) then you need to place it in another venue such as a consignment store etc. But the sale of the item could take months or even more depending on the item.
Auctions are not the best choice for every client, but when they are...watch out! It's going to be fast, furious and you're going to get a lump sum check for your items. Quickly.
Thanks for Reading! Click here for our next auction which will feature this collection of antique daguerreotypes & ambrotypes. To be sold at No Reserve!